Leverage
Using borrowed money to increase the size of a position relative to the capital committed. Ten-times leverage turns a 1% move in the asset into roughly a 10% move in the account.
Also called leveraged · gearing
Using borrowed money to increase the size of a position relative to the capital committed. Ten-times leverage turns a 1% move in the asset into roughly a 10% move in the account.
Why it matters
Leverage multiplies losses on exactly the same terms as gains, and can end a position through forced liquidation before any thesis plays out.
Related terms
- Margin
- Liquidation
- Risk Management